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Sunday, February 14, 2010

Greece

United, but for how long?

The European Union is probably ruing its successive expansions today. From the once six member coal buying cooperative that was supposed to align France and Germany, the EU, then the European Coal and Steel Community, has expanded into a massive and unwieldy conglomeration of states doing a messy sort of intergovernmentalism dance. Issues of control and sovereignty are unclear and got worse recently with the passage of the Lisbon Treaty. A document that creates a parallel hierarchy within an area that already has way more bureaucracy than it needs.

The crisis of the moment for the European Union is the Greek economy. The Greek government, which faced severe riots last year, is in trouble again. Habitually allowing your citizens to cheat the tax man, along with having a retirement age of 58 for full pension will tend to scramble the finances. Greece worsened the problem by lying about it until the very last minute, keeping unpaid bills off of the books. The question is now whether Germany and France will let Greece face sovereign debt default or intervene. Most commentators are arguing intervention will come in time to stop default, even if it is through gritted teeth. Germany raised its own retirement age to 67 and cannot be very happy paying for Greeks to retire nine years younger.

The elephant in the closet is what does this mean for the rest of Europe. Without a much stronger political union continued bailouts are unsustainable, the citizens of the richer member states simply will not put up with them. Greece is only first on the list of those needing bailed out. Similar problems, profligacy combined with state sponsored financial shenanigans abound in Italy, Spain and Portugal. The problems are long-term and structural, too much black market economy, too much corruption, declining populations and a lack of governmental will leading to stasis and gridlock. This is to say nothing of the newest members of the EU, though not the currency union, Romania and Bulgaria, who's scale of governmental corruption and economic decay mimic more closely the worst economies of Latin America, rather than the best of Europe.

1 comment:

Another thing that nobody is commenting about that we have seen, but that has to be relevant, is just how much money did Greece blow on hosting the Olympics? And for what kind of return? How much debt was rung up building, now empty, non-revenue producing, venues?

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